A proposed new and “improved” way of distributing state dollars to Iowa’s three public universities would reduce the University of Iowa’s allocation and boost funding to Iowa State University and the University of Northern Iowa.

A Board of Regent-commissioned task force appointed last year to analyze the possibility of using performance metrics to fund the institutions plans to recommend to regents a new funding system that would allocate 60 percent of state appropriations based on resident enrollment.

That favors ISU and UNI, which currently receive fewer state dollars annually than the UI but rely more heavily on in-state students.

“I think this will make a huge difference for these institutions,” said former regent and task force chairman David Miles.

Regarding the rest of the annual pool of state funds, 15 percent would be distributed based on each university’s progress and attainment, including degrees awarded, 10 percent would be allocated based on access, including minority and low-income student enrollment, and 5 percent would be based on job placement and continuation of advanced education for graduates.

The last 10 percent would be up to the regents to choose, although the task force is recommending they base 5 percent of that on sponsored research at the universities.

Iowa for decades has been funding its universities the same way — using a 40-40-20 split method dating back to 1945. Lawmakers in many states began using enrollment metrics to fund universities in the 1960s, but Iowa never changed its model.

All but about 10 states now either are using performance metrics to fund public higher education, transitioning to such a model or formally discussing doing so. The majority already have performance-based funding models in place.

Miles said Iowa’s existing system “simply is not working and it’s gotten terribly out of whack.”

“There is no question in my mind that we must change our past practice,” he said.

Miles will present the five-member task force’s recommendations to the regents at an upcoming board meeting and advise they implement the new funding model in the 2016 budget year and roll it out over a two- to four-year period.

If the state money was redistributed today based on the new formula, Miles said, the UI would see a hit of tens of millions of dollars.

“But no one intends to do that,” he said.

So the task force also is recommending capping the amount of money that could be moved from university to university each year to 1 to 2 percent of the 2013 budget, according to Miles. And the group is advocating for the Legislature to help with the transition by providing more funds to ease the hit for the UI, according to Miles.

“We think that’s the right solution,” Miles said.

State dollars today make up a much smaller portion of the general education budgets for the regent universities than in the past. In the 2012 budget year, for example, state support accounted for 36 percent of general university funding compared with 64 percent in 2001.

Meanwhile, student tuition made up 59 percent of the general university funding in 2012, up from 31 percent in 2001. The regents and the state are working together to keep tuition from rising even further — the Legislature just approved increased higher education funding so the regent institutions can freeze tuition for a second straight year.

And the regents have launched an “efficiency review” charging each university to find ways to save money and be more efficient on campus.

Miles on Monday called the UI a “gem in our higher education system” and said the proposed 1 to 2 percent cap in what can be reallocated annually is intended to minimize the impact.

“I don’t want to do anything to damage that great institution,” he said. “It’s a judgment call as to how much you want to put at risk relative to that fine institution as we go through this process of implementing it.”

But some task force members on Monday said a change in how the state money is distributed needs to happen sooner than later.

Cara Heiden, retired co-president of Wells Fargo Home Mortgage, who is representing ISU on the task force, countered that the way the state has allocated funds previously put the other two universities at risk.

“We need to get this reallocated to help those two institutions that have had pain,” she said. “The quicker the better, and the higher the dollar amount, the better.”

Mark Oman, retired senior executive vice president of Wells Fargo and Company and co-chair of the Board of Trustees for the UNI Foundation, agreed and said he’d like to see the Board of Regents move on the new funding model quickly.

“I appreciate we want to be smooth here, but the regents institutions have dealt with bigger changes than this over a shorter period of time,” he said.

Dragging out implementation, for example, could make it more difficult for UNI to achieve the marks the new system would require for additional funding.

“To drag this out puts them behind the eight-ball on some of these metrics,” Oman said.

Len Hadley, retired CEO of the Maytag Corporation who is representing the UI on the task force, was the only one who did not support the proposed new funding model and said he thinks state money should be allocated based on total student enrollment — not just enrollment of Iowans.

“I think this sends a very very dangerous message to our communities, faculty and students,” Hadley said. “What we have is not broken. What we have can be improved ... We do not have a drastic situation that would require taking $30 million to $50 million away from Iowa City.”

Hadley said he’s pleased with the suggestion to cap the annual impact on the UI in hopes of making the hit “less painful than it might have been.”

But at the task force’s inception, Hadley said, he met with UI President Sally Mason and asked what she’d like to see come from the discussions.

“President Mason’s words to me were, ‘Do no harm,’” he said.

Hadley said he plans to either write or speak publicly to regents about his concerns with the proposed funding model.

Miles said the goal is not to do harm but to improve equity and fairness among the universities while maintaining top quality education opportunities in Iowa.

“We want to be clear that while we believe strongly in this new funding model, nothing should be taken as criticism of any of our outstanding universities,” he said. “This model is to enhance the institutions over the wide arc of time.”

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